Business columnist

Deregulated, corporatised, but electricity prices have doubled in five years. Photo: Jessica Shapiro

In early March, the general manager for sales and marketing at Energy Australia, David Hamilton, wrote to a customer with a new electricity and gas offer.

Hamilton, unwittingly, picked the wrong customer that day.

Now, the profits of the industry hinge on hoping customers get the worst deal possible by doing nothing.

Although his new discount offer was posed in a form letter mailed out to thousands of Energy Australia's customers, one of those customers was Geoff Dunsford, retired actuary from Lindfield in Sydney.

Dunsford, a man with a keen eye for detail, parsed the letter with scepticism. He knew he had previously locked in a 12 per cent discount on his electricity charges and 8 per cent off gas charges until his two-year contract ran out. The letter from Energy Australia offered 4 per cent off both under a new one-year contract.

So he got on the phone - braved the automated voice menus, the musak and the friendly marketing messages - and eventually got to speak with a human being.

''When I protested, I was offered 15 per cent off electricity and 12 per cent off gas under a two-year contract,'' Dunsford says. Had he accepted the ''new offer'' contained in the letter, he would have been $600 a year worse off.

Dunsford then wrote back to the EA executive David Hamilton, saying the offer was ''highly deceptive and misleading conduct'' and demanded an explanation.

''You then 'make it as simple as possible' for me to accept this offer by relieving me of 'taking any action to accept the contract variation','' says his letter to Energy Australia. ''This is a clear encouragement to do as you suggest - particularly as you fail to mention that there are alternative contracts available, (like the 15 per cent-12 per cent discount structure I was able to obtain on protesting).

''Had I done as you suggest in the letter, this would have resulted in my paying your organisation $600 a year more for the same electricity and gas. This is highly deceptive and misleading conduct and I would be grateful for an explanation.''

Two months later, Dunsford is still waiting for an explanation.

A spokeswoman for Energy Australia did respond to BusinessDay, however. While declining to address the allegations of misleading behaviour she said the company encouraged customers to phone for help and letters were mailed out to notify of any pending changes to services and contracts.

The lesson is that customers are likely to lose if they do nothing. Price deregulation is already in place in Victoria and South Australia. In NSW it comes into effect on July 1, hence the flurry of correspondence from companies.

Dunsford's experience is mirrored by research from Choice: ''If you haven't reviewed your energy plan recently, the chances are you are paying too much.''

This presents a rich irony. Here we have an industry that has been deregulated and corporatised - and in Victoria, privatised - but where electricity prices have doubled in five years. And now, the profits of the industry hinge on hoping customers get the worst deal possible by doing nothing.

In fairness to Energy Australia, all retailers are hoping for the same outcome: zero action from customers.

As Geoff Dunsford says, prices were a lot lower and trust in the service provider a lot higher in the days when there was just a state electricity commission and no plethora of network, distribution, retailing and generation companies.

There is another element that appears to deter customers from pushing for a better deal, and that is complexity. Dunsford, unlike the typical customer, did bother to read the 44-page ''Energy Australia Market Retail Terms and Conditions'' relating to his contract.

''I don't remember any of this being necessary when we just got the Electricity Board to connect us, send us bills, pay them, or if not, disconnect us,'' he says. ''While there has been significant advertising of alternative contracts, all this does for many people is to sound as if they are making something we know is simple, unnecessarily complicated.''

As it is, we need some consumer protection, just like dealing with investment and financial advisers. If we can't wind back the clock, at the very least, any offer letter from a distributor should disclose the existence of alternatives that it has available.

mwest@fairfaxmedia.com.au

Twitter: @MichaelWestBiz

112 comments

I had a similar experience with this Company.I received a letter advising a chance to renew my contract at a certain rate. On checking I found the rate to be less than I was already receiving.After my phone call to them , they gave me a slightly better rate than I had been on so I was quite satified.Later , I was discussing my experience at the hairdressers , feeling rather proud when another client told me she had done better with another power supplier.It is now like insurance , if you do not querie anything you will be slugged

Commenter

elizabeth

Location

sydney

Date and time

May 19, 2014, 5:33AM

Let us know where to sign on to the class action.

Price fudging is just as reprehensible on phone contracts.

There should be a law which ensures the pricing in ALL consumer contracts is completely simple and transparent.

It wasn't until I had already signed with another company that my previous company contacted me by phone stating they could beat the offer that I had just signed up to and that there was still time for me to break that contract and resign with them.... too little too late. They found it perfectly acceptable to charge me full price for 2 months without contacting me to tell me my contract was up. If they want to keep customers they need to up their customer service.

Commenter

Tex

Location

Melbourne

Date and time

May 19, 2014, 6:16AM

Jim, Does that mean that they are higher on the scale than politicians? We need a massive move against the sale of public assets like the SEC. The IPA are pushing for the States to have another massive sell-off. Unless you enjoy being ripped off - oppose this with your loudest voice. And watch out for what Labor might do - they aren't mauch different from the IPAcrits when it comes to PPPS and other asset sales.

Commenter

Christopher

Location

Abscrapistan

Date and time

May 19, 2014, 6:35AM

The lesson here is, you need to actually sign a new contract with another company (can be all done over Internet or phone), and then, your old company will contact you and offer to better your new rate.

I was with Origin, on standard rate, and called them asking for a big discount. They said all they could offer was 10%, so I said, thats not enough. I looked online, and finally signed up for an offer by another company. The new company offered 25% off standard rates. I signed up online, and within the week, I got a call from the Origin retentions department. They offered me 28% off the standard rate I was originally on. I took the offer and cancelled my new contract with Alinta.I have a pool, so the new deal saves me about $500 per qtr.

The lesson, remember, is to actually move to new company, then the old one will offer their best deal, via a different department.

Just do a search on google.!

Commenter

Now I'm happy

Location

work

Date and time

May 19, 2014, 6:44AM

You really need to do your homework, I have a spreadsheet with each retailer and their STANDARD RATE then apply the discount. And let me say, some of these retailers websites do there absolute best to hide that standard rate! It needs a serious look by government. I know we have the gov website that allows you to check rates but really need to reign in the advertising of these shams!

22%, 25%, 30% off your bill these websites say? they have no idea what your current rate is so why are they allowed to advertise like this... 15% off is useless if the standard rate is the highest.

Commenter

BoredAtWork

Date and time

May 19, 2014, 7:42AM

@PJ, the class action should be against the politicians who privatised the electricity industry in the first place. Are you listening Mr Kennett? They have done untold economic and, by scrapping efficiency programs, environmental damage to this country.

Commenter

Whitfield L'Strol

Location

Melbourne

Date and time

May 19, 2014, 7:54AM

Thanks Jeff Kennet for putting the consumer in to this situation and selling the existing freeways as well. Abbott wants the states to sell whatever that is remaining so that his business buddies can buy them and rip us off to 'donate' to his fund raising.